In this conclusion of a two-part article, the authors examine the steps necessary to target the right processes for your organization’s alternative service delivery strategies.
There are many challenges and tradeoffs associated with making scope choices for your HR delivery strategy. Just as the Romans chose their battles carefully, HR leadership must carefully evaluate which processes are going to remain “as is” versus those that should be standardized and centralized or outsourced.
Performing this analysis will require some heavy lifting, but like soldiers building those straight roads in Roman times, if do the work, you’ll have a better line of sight on which HR service delivery strategies are best for your organization. Roll up your sleeves, put on your work gloves and get ready: road building ahead.
• Deconstruct Processes to Reevaluate Scale and Cost. Starting with your high-cost/low-scale processes (later you can add other processes to the analysis), deconstruct each one into its subprocesses. For each, determine the current amount of efficiency you’ve already achieved, as well as the proportion of total process cost for that subprocess. Include a country-by-country analysis of these activities (or differentiate by other criteria which drive process variations).
Once you’ve completed your baseline (as is) model for scale and costs, simulate the responses as they would look under an internal shared-services model and again under BPO. Consider the differences of shared services versus BPO. BPO will introduce new cost drivers such as integration to the retained parts, governance, and the providers’ own profits, but it can also deliver significant savings as a result of higher leverage of assets, process optimization, and labor arbitrage.
• Determine Process Optimization Opportunities and Associated Risks. Feeling like the weary soldier at this point? Stay strong because you have more building to do. For each process evaluated in the previous step, examine the qualitative service improvements you could expect through internal shared services, and again through BPO. To what extent will quality or timeliness be improved in each model? Shared services can generate process savings and reduce operational risks, but BPO is often able to achieve greater leverage of people, processes, and technology.
Consider also the “disruption” that results from standardization—the organizational pain that follows necessary behavior changes of your people. Payroll is mostly a back-office activity, and so little is actually “seen” by the workforce when underlying processes or technologies change. Performance reviews, self-service, and other processes, however, typically have higher visibility and hence higher pain and risk potential.
• Finalize and Reality-check the Scorecard. Assign weightings across your scorecard to reflect the level of importance your organization places on achieving individual savings, attaining improvement levels, or managing disruption factors for each subprocess. Finally, summarize your findings into a scorecard that enables you to balance potential gains and pains across a detailed array of services. As you are determining your resulting service portfolio, ask “Does this make sense?” Are there processes that should be bundled to make synergies happen? Despite the results, are there processes you simply will not split up too fineley because the resulting integration and synchronization efforts would be too painful?
Indeed, Rome was not built in a day, nor will an effective HR transformation strategy develop overnight. Creating a structured approach to evaluating your service delivery options is an important first step. In future articles we will continue to explore ways towards factory-like economics in BPO and the imperative of buyer/supplier/provider alignment.
